Investors flocked to old reliable blue chips today, helping erase one-third of Tuesday's plunge in the Dow Jones industrial average. Some high-priced tech stocks continued to be battered, but investors began stocking up on computer-related shares after the Nasdaq composite index fell as much as 4.2 percent in early-afternoon trading.
The relatively stable market suggested that Tuesday's plunge was more of an early spring housecleaning than a sign that the long-running bull market had finally run its course. While overseas markets had fallen sharply in the wake of Wall Street's Tuesday tremor, the Dow opened on an up note and almost never faltered as more than 1.1 billion shares were traded on the New York Stock Exchange.
The Dow average rose 124.72, or 1.1 percent, to 11,122.65, one day after falling 3.2 percent. International Business Machines, Alcoa and Minnesota Mining & Manufacturing helped lead the rise. The Standard & Poor's 500-stock index gained 2.69, or 0.2 percent, to 1402.11.
The Nasdaq, which fell as much as 166 points earlier in the day, rebounded to close down 24.15, or 0.6 percent, at 3877.54. Dell, the number one direct seller of personal computers, helped lead the Nasdaq back as it rose 3-5/16 to 49-15/16. One of the biggest losers was BMC Software, which fell 27-7/16, to 49-9/16, after it said it would fall short of forecasts.
"Given how strongly Nasdaq performed last year, this is not surprising," said Mary Farrell, market analyst at Paine Webber. "But I would not be prepared to say a correction is behind us. We will remain in a bull market, but more in the normal range--rather than huge gains."
On Tuesday, the Nasdaq had plunged 229.92 points--its worst one-day point decline ever.
Analysts said that investors were continuing to cash out of stocks that had surged last year, after holding them just long enough to miss the tax year.
"After experiencing a year like last year, which was unprecedented by most measures, it's not surprising that there'd still be profit-taking," said Ric Dillon, a managing partner of Loomis, Sayles & Co., a D.C.-based firm that oversees $2 billion in equities.
The selling was fueled in part today by a report from Amazon.com that despite strong sales, the online book pioneer is still not making money and may not in the foreseeable future.
"That raises a question of the impact of the Internet on the economy," Dillon noted. "It has certainly revolutionized the economy. But the question is: Who benefits from that revolution? Clearly, the consumer has. But will the companies?"
Steven Frenkel, chief market strategist at Ladenberg, Thalman, offers an emphatic yes. He thinks the Nasdaq will triple in the next two years and told his staff to buy today.
There were a lot of bargains, he said, particularly in business-to-business companies--those that provide consulting and software. Many, Frenkel noted, were down 20 percent in just two days. "This business-to-business sector has increased so dramatically over the last two months," he said. "Now there's been violent profit-taking."
CAPTION: Mixed Returns (This chart was not available)